Should I use a wire transfer or cashier’s check for closing? | Mortgages and advice
If you have finally reached the final stage of the home buying experience, then you are on the home stretch. However, closing involves a specific set of procedures that must be followed carefully to avoid delays or complications. One such process is to secure a bank-certified method of payment, such as a cashier’s check or wire transfer, for the closing day.
A cashier’s check or wire transfer is really the only option for a safe and reliable closing transaction, says Steve Hill, senior mortgage broker at SBC Lending in Southern California.
“Most escrow companies won’t accept a personal check due to fraud,” Hill says. “And cash has its own issues with counterfeiting and money laundering.”
Using a Cashier’s Check for Closing
A cashier’s check is guaranteed by a bank or credit union, often for a fee, and used when the recipient wants assurance that the check will clear. If the check is dishonoured, the bank or credit union is responsible, making it a safer payment method than a personal check.
Cashier’s checks not only have relatively low fees, but can also come in handy if something goes wrong at the closing, says Chuck Meier, senior vice president and director of mortgage sales at Sunrise Banks.
“The check can also be made out to you, so if the transaction doesn’t go through, you can deposit the check back into your account without delay,” says Meier.
If you want a cashier’s check for closing day, you should go to your bank branch or credit union, or you may be able to get one online from your financial institution. At a branch, you will likely need the following:
- ID photo.
- Exact amount of the check.
- Recipient’s name.
- Sufficient funds in your account to cover payment and check fees.
If you have the funds to cover the payment, then your money will be transferred to the bank. The bank will print you a check with the recipient’s name and the bank’s account number rather than your own. Verify that the details are correct.
Always get a receipt for your cashier’s check in case of loss or theft. Keep the check in a safe place until you need it.
Advantages and disadvantages of a cashier’s check
- Relatively fast. Generally, the funds are made available to the beneficiary the next business day.
- Guaranteed. No one has to worry about whether the check will clear because the bank guarantees the full payment amount.
- Secured. The check has security features, such as watermarks, that reduce fraud. The recipient’s name is printed on the check and no one other than that person can cash it.
- Inconvenient. If your bank does not allow you to request a cashier’s check online, you will need to visit a branch to obtain one. Checks also exclude a virtual close as you must deliver them in person.
- Check fees. Cashier’s check fees are approximately $10 to $15. Ask your bank about fees, as they may be waived for some customers.
- Fraud. Scammers can create fake bank checks that look real. If you have any doubts about the authenticity, take a check to the bank or call the bank: look up the bank’s phone number instead of using the one on the check.
Using a Wire Transfer for Closing
A wire transfer allows you to send your closing payment to the title company or escrow agent directly from your personal bank account. Banks around the world use the Society for Worldwide Interbank Financial Telecommunication, also known as SWIFT, to securely transfer funds between financial institutions.
“A transfer can be easily captured digitally and documented for all parties involved in a real estate transaction, and the money is usually available almost immediately, solidifying the transaction for all parties,” said Tabitha Mazzara, Chief Operating Officer of MBANC, a mortgage lender.
Unlike a cashier’s check, a wire transfer can be requested over the phone, online or in person. A wire transfer may require the sender’s government-issued ID, such as a driver’s license or passport, and the following information:
- The name and contact details of the sender and recipient.
- Sender’s and receiver’s bank account number and routing numbers.
- The recipient’s ABA routing number.
- Transfer currency.
A domestic wire transfer takes approximately one business day to be received. If your final transaction is for an overseas property, an international transfer may be available within three to five business days.
Advantages and disadvantages of a bank transfer
- Quick. You can expect to see your funds in as little as one business day.
- Flexible. A transfer can be scheduled according to your own schedule, not according to the opening hours of a bank branch.
- International. You can make the payment abroad, even if you cannot attend the closing in person.
- Irreversible. If a bank transfer is made, even if it’s an error or fraud, you can’t cancel it.
- Fraud. Scammers can encourage their victims to send money via bank transfer.
- Dear. Wire transfers can be an expensive way to send money, especially international transfers.
Fees for Cashier’s Checks vs. Wire Transfers
Payment by cashier’s check is generally cheaper than bank transfer. The cost of both varies by financial institution.
Sometimes the difference between the two is negligible.
According to Mazzara, “A cashier’s check typically costs between $10 and $25, and transfer fees are typically $30 to $50.”
Bank check or bank transfer: which is better?
You can talk to your realtor and title company about whether a cashier’s check or wire transfer is better if you’ve looked at the pros and cons and are still unsure.
Make sure payment is ready for closing, whichever method you choose. Homebuyers often forget that their closing payment is blocked one to two days before closing, according to Hill.